OFAC's New Advisory on Sham Transactions and Sanctions Evasion

Severity: Medium (Score: 58.0)

Sources: Mondaq, Wilmerhale, Hoganlovells

Summary

On March 31, 2026, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) released a Sanctions Advisory titled 'Guidance on Sham Transactions and Sanctions Evasion.' This advisory addresses the risks associated with sham transactions used by sanctioned individuals, such as Russian oligarchs, to conceal their interests in property. OFAC emphasizes that these transactions do not extinguish a blocked interest and outlines the need for companies to reassess their due diligence processes beyond mere ownership analysis. The advisory identifies characteristics of sham transactions and provides a non-exhaustive list of red flags for companies to consider when evaluating compliance with U.S. sanctions. Companies are warned that reliance solely on the 50 Percent Rule may not be sufficient to avoid sanctions violations. Key Points: • OFAC's advisory focuses on risks from sham transactions used to evade sanctions. • Companies must reassess due diligence policies beyond just ownership analysis. • Sham transactions do not eliminate blocked interests in property.

Key Entities

• Russian Federation (country)
• United Kingdom (country)
• United States (country)